Oil Rigs at Record as Permian Drillers Fetch Higher Price

July 3 (Bloomberg) -- Rigs targeting oil in the U.S.
climbed to a record this week amid higher crude prices that
bolstered drilling in the Permian Basin of Texas and New Mexico,
the nation’s largest onshore oil field.

Oil rigs rose by four to 1,562, the highest level since
Baker Hughes Inc. separated its oil and gas counts in 1987. Gas
rigs dropped three to 311, the Houston-based field services
company said on its website. The Permian added the most, rising
by six to 560, now accounting for one-third of the U.S. total.

Rotary rigs actively seeking oil and gas in the U.S. have
surged by 117 in 2014 after two straight years of losses as
producers use a record number of horizontally drilling ones to
pull oil and gas out of shale formations amid higher energy
prices. The boom has raised domestic crude production to the
highest level in more than a quarter-century and brought the
U.S. closer to energy independence than it has been in 29 years.

“Drillers are getting a high price for oil, and the
Permian is a big play with a lot of formations,” James
Williams, president of energy consulting firm WTRG Economics in
London, Arkansas, said by telephone today. “The count is
evidence that they’ve come up the learning curve on how to
produce out of those various formations.”

North Dakota, home of the Bakken formation, and Texas,
where both the Eagle Ford and Permian lie, now make up almost
half of U.S. oil production as drillers target unconventional
tight-oil and shale reservoirs, the Energy Information
Administration, the Energy Department’s statistical arm, said in
a July 1 report.

Oil Production

U.S. oil production slipped 4,000 barrels a day in the week
ended June 27 to 8.44 million after rising earlier in the month
to the highest level since 1986, EIA data show. Oil supplies
slid 3.16 million barrels to 384.9 million, the agency said.

West Texas Intermediate crude for August delivery fell 42
cents to settle at $104.06 a barrel on the New York Mercantile
Exchange.

Natural gas for August delivery gained 4.9 cents, or 1.1
percent, to $4.406 per million British thermal units today on
the Nymex.

Rigs in the Williston Basin, where the Bakken is located,
were unchanged at 178. North Dakota regulators approved a policy
July 1 regulating natural gas flared from the Bakken and Three
Forks formations.

“One of the things that might be inhibiting growth in the
Bakken is the increased regulation,” Williams said. “What
you’re doing there is simply economics.”

Rigs dropped the most this week in the gas-rich Marcellus
formation of the eastern U.S., where the count fell by three to
79. Texas’s Eagle Ford lost one to 213.

In Canada, the rig count surged by 73 to 309, following a
seasonal drilling pattern.